Example: creditor quasi-repos

CFM46250 explains why both C and D have a creditor quasi-repo in this case.

1/1/09: A sells securities to C for 100.

30/4/09: C novates its rights and obligations under the repo to D (also a lender), for which it receives 102 from D. This represents the advance of 100 made by C, plus a finance return of 2 (4 months at 6% per annum).

30/6/09: A purchases the same or similar securities from D for 103. This includes a further finance return of 1 (2 months at 6% per annum).

Treatment of C

Accounting entries, in accordance with GAAP in addition to the entries at CFM46250:

1/1/09-30/4/09 (repo ‘interest’ accrual):

Dr Financial Asset 2; Cr P&L 2 (the financial asset which has increased to 102 is reduced to nil by receipt of the novation payment on 30/4/09)